Putting Value into Property Management

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Are your tenants asking for lower rent because they have to pay letting fees?

1st June 2012
Bartering at markets can be fun. But if your tenants are bartering for a lower rent, you’ve got a problem. Here’s how to avoid it.

Bartering at markets can be fun. But if your tenants are bartering for a lower rent, you’ve got a problem. Here’s how to avoid it.

There’s something decidedly exotic about markets in far-flung places: the fragrant smell of spices; the enchanting sing-song language chattered by the locals; and the unusual wood-carved products. And you have a swathe of these unusual products in your arms: gifts for your family, and some ethnic-style ornaments for your home.

Of course, as is common in foreign parts, haggling is all part of the process. And you know that with the armload of goodies you’ve picked up, you’ve got strong negotiation power. The wizened stallholder probably hasn’t made a sale this big all month! So a-haggling you go.

While haggling over price might be OK overseas in far-flung places, there shouldn’t be any of it going on in your investment properties.

But if your property manager is charging letting fees, there’s a good chance you’re missing out financially.

Here’s why letting fees could be affecting your investment income

A typical letting fee is equivalent of one week’s rent (plus GST), and the prospective tenant must pay this to the property manager to secure the tenancy. This is an extra cost, in addition to the bond and upfront rental payment. Essentially, it is all about the tenant having higher costs for doing business with the property manager who charges a letting fee. The result? The tenant expects something in return.

So here’s what typically happens. And that is, the prospective tenant starts bartering. The conversation goes along the lines of:

Prospective Tenant: (Realising that the property manager is anxious to rent the property) “That’s quite a big outlay up-front, with the letting fee as well. In order to pay the letting fee, I’d need the weekly rent to be at such-and-such a level.” (At this point, the prospective tenant asks for a discount from $30 to $60 a week.)

Property Manager: (Panicking; they want to let the property quickly and get their hands on the letting fee) “Let me speak to the property owner, and I’ll see what I can do.”

And you can guess at what happens next. And after all, you might be taking this call while you’re stood in an exotic, foreign market and you can hardly hear what the property manager is saying above all the noise and hustle and bustle. So you end up agreeing… and that decision costs you thousands of dollars for the rest of the year.

Don’t let letting fees affect your property’s profitability

If your property manager weren’t charging a letting fee (which goes into their pocket, not yours), you wouldn’t even be having this discussion with them. So the property manager’s greed has cost you.

Don’t risk that happening to you. How? Make sure you choose a property manager who doesn’t charge letting fees!

After all, property investment is a business matter, and bartering shouldn’t have to come into it. Not if you’re serious about your investment.



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